German Unemployment Climbs As Economic Downturn Gradually Affects Labor Market

Germany's unemployment rose for a second straight month and underemployment continued to rise, suggesting that the resilience of the labor market against the economic slowdown is gradually weakening.

The number of unemployed grew by a seasonally adjusted 4,000 persons after a 1,000 increase in July, preliminary data from the Federal Employment Agency showed on Thursday. The rise was in line with economists' expectations.

This increase can be attributed solely to developments in unemployment insurance due to the economic downturn, the agency said.

The seasonally adjusted jobless rate was 5 percent, which has been the same over the past few months.

Underemployment, excluding those in the short-time working schemes known as Kurzarbeit, rose a seasonally adjusted 3,000 monthly in August.

On a non-adjusted basis, the unemployment grew by 44,000 persons to 2.319 million from 2.275 million in the previous month.

"In unadjusted terms, this is the worst August performance of the German labor market since reunification," ING economist Carsten Brzeski said.

The non-adjusted jobless rate rose to 5.1 percent from 5 percent.

"The economic downturn is leaving its mark on the labor market," Federal Employment Agency CEO Detlef Scheele said.

The biggest euro area economy is on the verge of a recession as it contracted 0.1 percent in the second quarter due to weak foreign demand, and  there are signs that the shrinking continued into the third quarter, strengthening calls for stimulus.

The closely-watched ifo business confidence index fell to its lowest level in nearly seven years in August as sentiment in manufacturing was hurt by escalating trade tensions across the world.

All in all, the labor market remains robust, the official noted. But, employment growth is losing momentum, and the demand for labor, though high, is declining, Scheele added.

The number of vacancies reported to the agency dropped by a seasonally adjusted 8,000 in August.

"The protection shield against the industrial slowdown and external woes is getting thinner if not wearing out," ING's Brzeski said. "This is a stagnation and not a crisis."

Earlier on Thursday, data from the statistical office Destatis showed that the ILO jobless rate fell to 3 percent in July from 3.1 percent in June.